Sunday, April 26, 2009
Saturday, January 24, 2009
Satyam - Raju in Mahabharata of market
Satyam is stock listed company in India. Managing Director of the company is in hand of its promoter Mr. Raju who believing the company his own, exercising sovereign rights withdrawn money from accounts of the company by cooking accounts. He, who made a company of might by employing Indian top intellect and operated in the world market which is blood thirsty competitive, and success is only survival kit, and in situation like this, sales of company made it 4rth largest in India.
Raju is in market where he with his company sells computer software and services to all clients who are free to buy or not buy, and in competition with other companies; on the other hand he and his company are selling shares in a market of shares which is again voluntary, and buyers are free to choose price of shares, and whether to buy or not. Customers and Investors both are players of market, maximizing their self interest and are free to exit at a price and flexibility of market. Imagine a vegetable market of your neighborhood. You (investors and customers) go to buy vegetable and are free to choose low price and best quality. And what compulsion is for seller? Sellers of vegetable have no choices, and it runs a company that it cannot escape like the freewheeling customers and investors. These two are not interested in company and provide no guarantee and yet expect sellers in prison of market to run like horses in a race course. Horses get sacrificed in serving customers and investors who eat them up. Satyam died like horse in race course trying to outperform beyond its capacity. In India, unlisted companies have private participation and own the risk and reward of company like of truly responsible of the fraud and deception and honesty and opportunity.
Price (detachment) vrs Commitment (attachment)
All management of companies feel revenge for customers and investors who are enjoying free market without any responsibility. On the other hand, the management cannot have escape from its responsibility as companies are a commitment and it cannot treat employees and research and development ambitions like horses in race courses or stock market at flicker of buttons.
Risk vs Value vs Measurement
Market is test-bench of value. The judge is free choice with equality and independence. Price is a summary of voluntary assessment of value agreed between buyers and seller for things that are bought and sold. If price is good, seller makes profit from growth in size of business. Price is only consideration and agreement of exchanges. Risk is a matter of choice i.e., political choices and informed choices. Volatility of prices is indicator of ineffective choices. Investments in stock market is a political choice just like people vote in politics of a nation state without any say in changing its management or principles. Deception (called speculation) in making a political choice is a strategy.
In a market, buyers (customers and investors) and sellers independently and without force, agree at prices of exchanges in own self-interest. Each one enters market and, mercilessly buy and sell and in small or large quantity. In stock market, you can buy shares in lot of 10 shares and as customer, you can buy software licence as little as you want. This way, buyers have option but sellers don't. Sellers advertise for products and financial statements that project a deception only to be discovered by buyers. No buyer can have a rule to apply results of financial statement in fixing prices. Measurements are therefore not value, and vice-versa.
Auditors and SEBI are, on principle, act as leeches sucking blood of horses that run in a competition merely for pleasure of customers and investors, and not in love of horses and family of horses. Government also takes bribes and taxes, without accountability and all of torture is survived by company and who is a face or responsible of it. Investors, customers and government are faceless people but this cannot be true with faces of company. Had books determine honesty and value, institution of markets would not have existed and all of prices of products and of share are produced by accountants and auditors and regulators. Measurement as indicator of value is theoretically a good idea in a non-market exchanges where voluntary evaluators do not go, but in public exchanges, it is a war where no governments, no auditors, no accountants have any say. In a war, strategy and protection and choices of weapon are upto its players.
Problem with regulators, government and auditors and accountants is their lack of learning ability. They often do not understand purpose of measurement, and how measurement can reflect value. In other words, they lack the knowledge (theory, model of making prediction) and stick to their rules of measurement. These bodies working with data and information are 'prediction experts' in competition among themselves to constantly hone their ability to predict performance of players inside markets and let buyers and sellers take it or leave it. They can act as insurance company for investors and measure risk of the market, at own risk. But in a traditional way, as a rent seeker or leeches attached to horses in a race-course, it only weakens players of the game and confuses audiences with measurement and value. These agencies get more and more strength from bad blood, and it only increases a distances between measurement and value. And value and role of these auditors, accountants and regulators remain always illusive.
In Mahabharata, dice was played between Kaurav and Pandav. This dice is a market. Players in it have limited access to information, have to make political choices and take a real risk. Blind DhratRashtra existed but could not interfere. Moral of the story is, "Enter the market at own Risk". As a preventive step, regulators should bar entry of vulnerable investors who could loose everything in it like the Yudhisthir. An investor is supposed to use his/her intellect as a weapon, and must have the ability and courage to face his/her decisions. Money on block is just a measurement, whereas risk of loosing (loss) or winning (profit) is final assessment of value of the decision taken. In Satyam, Raju won and Raju lost. And when game is over, all that remains is a story.
Agreement vrs Trust
Market is a war zone. Buyers and sellers have opposite self-interests but a common goal. It is like two warriors fighting for a piece of land. Each one can choose own weapon. After a war is settled, an agreement takes place. This agreement is between opposites, and not an instrument of trust. Trust is a term between a mother and child, and agreement between two warriors in a state of compromise. Compromise and love are clearly two different things. When competition increases, distance between definition of agreement and trust widens.
Valuation vrs Measurement
Customers including investors must have responsibility of risk and can buy in quantity and price which is a voluntary decision. If a vegetable sells for Rs 30;Kg, it can sell for Rs 3/Kg when it gets rotten. The price includes discount of competition, and premium of deception. Auditors and accountants who are neither investor or customers, have no idea of price valuation. Only prices is measure of true value. If for example, Satyam share was once sold for Rs 190 per share at one day, and Rs 30/share another day. Suitors can buy Satyam and it is all, and it relieves Mr Raju from responsibility of Satyam. Raju lost price of share and it is loss that he incurred by his own actions. He can exit the market taking Rs 30/share and gets relieved and he need not endure pain. He after exiting market, is no longer a player. In market, price is only arbiter and is determined by the god of free choices.
Market regulator like SEBI have jurisdiction inside the sporting area. It can disqualify a player and ask him to get out of the game. After that, the player comes again when he is fit to play by rules.
Sometime people think valuation and measurement are same things. This is wrong. A tailor who measures fabric for sewing suite length cannot be made professor of humanity. Accountants similarly are not the best people for valuation. Market players only can do it.
Lack or premium of morality and cooking or honesty of accounts are not a component of price. Price is lead by opportunity, competition and speculation and deception. All is fair in war and markets.
Political choice vrs Informed choices
Taking analogy of democratic governments where citizens elect Prime Minister but have no control over its action. Investors in stock market similarly make political choice without any real tool of judging a right management. Investors are misled by wrong claim and so is in running a nation. Raju of Satyam is like Prime Minister of a democratic nation dislodged by opponents in a war. Indians for a long time are used to corrupt government which it once innocently admitted to have leakages of 85% and only 15% used for actual purposes. This (politics) is an example of organized crime and citizen cannot escape it. Market and Raju are at least less threatening, than that of such a political nation.
Tributes to Fallen Heros
Soul of fallen hero is enlightened, but lying at bed of arrows. Raju is Bheeshm of the Mahabharata who loved Satyam (soverignty) of ownership. Satyam like Arjun killed Raju own grandfather of Satyam. Employees of Satyam are like children of parents Raju who is now a convict. This is organization, and an organization to exist requires sacrifices. At least for Raju, he at least is most happily by this knowledge of market, and realizes life in solitude. Those living on Satyam food, must have thoughts " my father was a thief and all my sainthood comes from it".
Raju is in market where he with his company sells computer software and services to all clients who are free to buy or not buy, and in competition with other companies; on the other hand he and his company are selling shares in a market of shares which is again voluntary, and buyers are free to choose price of shares, and whether to buy or not. Customers and Investors both are players of market, maximizing their self interest and are free to exit at a price and flexibility of market. Imagine a vegetable market of your neighborhood. You (investors and customers) go to buy vegetable and are free to choose low price and best quality. And what compulsion is for seller? Sellers of vegetable have no choices, and it runs a company that it cannot escape like the freewheeling customers and investors. These two are not interested in company and provide no guarantee and yet expect sellers in prison of market to run like horses in a race course. Horses get sacrificed in serving customers and investors who eat them up. Satyam died like horse in race course trying to outperform beyond its capacity. In India, unlisted companies have private participation and own the risk and reward of company like of truly responsible of the fraud and deception and honesty and opportunity.
Price (detachment) vrs Commitment (attachment)
All management of companies feel revenge for customers and investors who are enjoying free market without any responsibility. On the other hand, the management cannot have escape from its responsibility as companies are a commitment and it cannot treat employees and research and development ambitions like horses in race courses or stock market at flicker of buttons.
Risk vs Value vs Measurement
Market is test-bench of value. The judge is free choice with equality and independence. Price is a summary of voluntary assessment of value agreed between buyers and seller for things that are bought and sold. If price is good, seller makes profit from growth in size of business. Price is only consideration and agreement of exchanges. Risk is a matter of choice i.e., political choices and informed choices. Volatility of prices is indicator of ineffective choices. Investments in stock market is a political choice just like people vote in politics of a nation state without any say in changing its management or principles. Deception (called speculation) in making a political choice is a strategy.
In a market, buyers (customers and investors) and sellers independently and without force, agree at prices of exchanges in own self-interest. Each one enters market and, mercilessly buy and sell and in small or large quantity. In stock market, you can buy shares in lot of 10 shares and as customer, you can buy software licence as little as you want. This way, buyers have option but sellers don't. Sellers advertise for products and financial statements that project a deception only to be discovered by buyers. No buyer can have a rule to apply results of financial statement in fixing prices. Measurements are therefore not value, and vice-versa.
Auditors and SEBI are, on principle, act as leeches sucking blood of horses that run in a competition merely for pleasure of customers and investors, and not in love of horses and family of horses. Government also takes bribes and taxes, without accountability and all of torture is survived by company and who is a face or responsible of it. Investors, customers and government are faceless people but this cannot be true with faces of company. Had books determine honesty and value, institution of markets would not have existed and all of prices of products and of share are produced by accountants and auditors and regulators. Measurement as indicator of value is theoretically a good idea in a non-market exchanges where voluntary evaluators do not go, but in public exchanges, it is a war where no governments, no auditors, no accountants have any say. In a war, strategy and protection and choices of weapon are upto its players.
Problem with regulators, government and auditors and accountants is their lack of learning ability. They often do not understand purpose of measurement, and how measurement can reflect value. In other words, they lack the knowledge (theory, model of making prediction) and stick to their rules of measurement. These bodies working with data and information are 'prediction experts' in competition among themselves to constantly hone their ability to predict performance of players inside markets and let buyers and sellers take it or leave it. They can act as insurance company for investors and measure risk of the market, at own risk. But in a traditional way, as a rent seeker or leeches attached to horses in a race-course, it only weakens players of the game and confuses audiences with measurement and value. These agencies get more and more strength from bad blood, and it only increases a distances between measurement and value. And value and role of these auditors, accountants and regulators remain always illusive.
In Mahabharata, dice was played between Kaurav and Pandav. This dice is a market. Players in it have limited access to information, have to make political choices and take a real risk. Blind DhratRashtra existed but could not interfere. Moral of the story is, "Enter the market at own Risk". As a preventive step, regulators should bar entry of vulnerable investors who could loose everything in it like the Yudhisthir. An investor is supposed to use his/her intellect as a weapon, and must have the ability and courage to face his/her decisions. Money on block is just a measurement, whereas risk of loosing (loss) or winning (profit) is final assessment of value of the decision taken. In Satyam, Raju won and Raju lost. And when game is over, all that remains is a story.
Agreement vrs Trust
Market is a war zone. Buyers and sellers have opposite self-interests but a common goal. It is like two warriors fighting for a piece of land. Each one can choose own weapon. After a war is settled, an agreement takes place. This agreement is between opposites, and not an instrument of trust. Trust is a term between a mother and child, and agreement between two warriors in a state of compromise. Compromise and love are clearly two different things. When competition increases, distance between definition of agreement and trust widens.
Valuation vrs Measurement
Customers including investors must have responsibility of risk and can buy in quantity and price which is a voluntary decision. If a vegetable sells for Rs 30;Kg, it can sell for Rs 3/Kg when it gets rotten. The price includes discount of competition, and premium of deception. Auditors and accountants who are neither investor or customers, have no idea of price valuation. Only prices is measure of true value. If for example, Satyam share was once sold for Rs 190 per share at one day, and Rs 30/share another day. Suitors can buy Satyam and it is all, and it relieves Mr Raju from responsibility of Satyam. Raju lost price of share and it is loss that he incurred by his own actions. He can exit the market taking Rs 30/share and gets relieved and he need not endure pain. He after exiting market, is no longer a player. In market, price is only arbiter and is determined by the god of free choices.
Market regulator like SEBI have jurisdiction inside the sporting area. It can disqualify a player and ask him to get out of the game. After that, the player comes again when he is fit to play by rules.
Sometime people think valuation and measurement are same things. This is wrong. A tailor who measures fabric for sewing suite length cannot be made professor of humanity. Accountants similarly are not the best people for valuation. Market players only can do it.
Lack or premium of morality and cooking or honesty of accounts are not a component of price. Price is lead by opportunity, competition and speculation and deception. All is fair in war and markets.
Political choice vrs Informed choices
Taking analogy of democratic governments where citizens elect Prime Minister but have no control over its action. Investors in stock market similarly make political choice without any real tool of judging a right management. Investors are misled by wrong claim and so is in running a nation. Raju of Satyam is like Prime Minister of a democratic nation dislodged by opponents in a war. Indians for a long time are used to corrupt government which it once innocently admitted to have leakages of 85% and only 15% used for actual purposes. This (politics) is an example of organized crime and citizen cannot escape it. Market and Raju are at least less threatening, than that of such a political nation.
Tributes to Fallen Heros
Soul of fallen hero is enlightened, but lying at bed of arrows. Raju is Bheeshm of the Mahabharata who loved Satyam (soverignty) of ownership. Satyam like Arjun killed Raju own grandfather of Satyam. Employees of Satyam are like children of parents Raju who is now a convict. This is organization, and an organization to exist requires sacrifices. At least for Raju, he at least is most happily by this knowledge of market, and realizes life in solitude. Those living on Satyam food, must have thoughts " my father was a thief and all my sainthood comes from it".
Other fallen heros like Lalu Yadav (fodder scam fame), Bill Clinton (sex and lied on oath), DhiruBhai (buying governments) and even Sanjay Dutta (violating arms laws) have risen again more strongly from ashes. Every Bheeshm has self -willed death. Lalu and Bill have their wives in government. DhiruBhai is in rebirth of Reliance. Raju is now facing similar test of fate, and he can re-surface in another face and form once again.
Author is not justifying Raju and his actions. It is a study of human behaviour in markets. The phenomena of Raju has a lot of education on principles of design of markets, its motivation, and sacrifices in organizing. Indian economics is morally hazardous. As one puts it, when you are a thief, you are judged by a bigger thief. The moral is therefore ... never be a number 2 - in crime, -in politics and -in business. Raju if survives and gets strength to live either becomes politician of top order, or he becomes a saint as Bheeshm who lastly surrenders to Sri Krishna and roams freely on the earth. The second is better.
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